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The energy infrastructure company Sempra was formed by the 1998 merger of Pacific Enterprises, the parent company of Southern California Gas, and Enova, parent of San Diego Gas &amp; Electric. Sempra operates through three business lines: Sempra California provides energy to consumers in Southern and Central California through utilities SDG&amp;E and SoCalGas. Sempra Texas includes Oncor Electric Delivery, an electric transmission and distribution utility. And Sempra Infrastructure develops, builds, and operates energy infrastructure. The company was previously known as Sempra Energy and rebranded to Sempra in 2021.

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Sempra (SRE): Company Profile, Stock Price, News, Rankings

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Sempra

sempra

Good day, and welcome to Sempra's First Quarter Earnings Call. Today's conference is being recorded. At this time, I'd like to turn it over to Glenn Donovan. Please go ahead.

Good morning, and welcome to Sempra's first quarter twenty twenty five earnings call. A live webcast of this teleconference and slide presentation are available on our website under our Events and Presentations section. We have several members of our management team with us today, including Jeff Martin, Chairman and Chief Executive Officer Karen Sedrick, Executive Vice President and Chief Financial Officer Justin Bird, Executive Vice President and Chief Executive Officer of Sempra Infrastructure Alan Nye, Chief Executive Officer of Encore Don Clevinger, Chief Financial Officer of Encore Carolyn Wynn, Chief Executive Officer of SDG and E Peter Wall, Senior Vice President, Controller and Chief Accounting Officer and other members of our senior management team. Before starting, I'd like to remind everyone that we'll be discussing forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected in any forward looking statement we make today.

The factors that could cause our actual results to differ materially are discussed in the company's most recent 10 ks and 10 Q filed with the SEC. Earnings per common share amounts in our presentation are shown on a diluted basis, and we'll be discussing certain non GAAP financial measures. Please refer to the presentation slides that accompany this call for a reconciliation to GAAP measures. We also encourage you to review our 10 Q for the quarter ended 03/31/2025. I'd also like to mention that forward looking statements contained in this presentation speak only of today, 05/08/2025, and it's important to note that the company does not assume any obligation to update or revise any of these forward looking statements in the future.

With that, please turn to Slide three, and let me hand the call over to Jeff.

Thank you all for joining us today. Earlier this morning, we reported first quarter twenty twenty five adjusted EPS of $1.44 which compares favorably to the prior period's results of $1.34 In addition, we're pleased to affirm our full year 2025 adjusted EPS guidance range of $4.3 to $4.7 and we're also affirming our 2026 EPS guidance of $4.8 to $5.3 You'll also recall that we've issued a projected long term EPS CAGR of 7% to 9% for twenty twenty five through twenty twenty nine and have guided to the high end or above that range. As we've discussed, this projection is a compound annual growth rate for the five year planning period and does not imply linear growth year to year. Now let's turn to our plan of execution for the remainder of the year. Today, our first quarter results reflect a positive step toward the execution of five value creation initiatives.

First, we plan to invest roughly $13,000,000,000 this year in energy infrastructure with over $10,000,000,000 targeted for our U. S. Utilities. Just as important, we have initiatives underway that are intended to improve the regulatory compact in both Texas and California. Second, we continue to review opportunities to realign our portfolio to support the growth and expansion of our Texas and California utilities while also maintaining a strong balance sheet.

As a result, we announced our intention to sell minority interest in Semper Infrastructure Partners. Given the robust demand today for energy infrastructure assets, we expect to complete a transaction that highlights the continued growth in the value of that business. Third, we're continuing our strategy of selling noncore assets and recycling capital to finance our future growth. That's why we recently announced our plans to divest ECOgas, a regulated natural gas distribution utility in Northern Mexico. In combination, these actions are designed to advance our company's broader effort to simplify the business and reduce reliance on future issuances of common equity to fund the company's five year capital plan.

With the close of these transactions and the anticipated growth of our utilities, we expect our regulated businesses will account for a much larger percentage of Sempra's earnings on an annualized basis. It's also important to note that we expect these combined transactions to be accretive to the company's earnings per share forecast and credit enhancing. We also continue to execute on our Fit for '20 '20 '5 campaign that we launched in the summer of twenty twenty four. The goal of this initiative is to reduce the company's cost structure to align with our future business needs. These efforts are also focused on new technology adoption, including the use of artificial intelligence to improve productivity and customer service.

Taken together, these efforts are expected to help support improvements in the affordability of our services and our financial performance. And finally, we'll continue our foundational work of delivering safe and reliable energy for our customers through operational excellence. We're an established leader today in wildfire science and mitigation, and we'll look to build on those competitive advantages here in California as well as at Encore. The key takeaway is we have an exceptional opportunity to grow and competitively differentiate our company through the end of the decade. To deliver on that opportunity, we understand the importance of executing well in the near term.

Our first quarter financial results are an important first step, and as a management team, we have a plan of execution in place for the balance of 2025 that we believe will make our company stronger and more valuable. With that, please turn to slide four where Karen will walk through business and financial updates.

Thank you, Jeff. Let me start by saying our three growth platforms are off to a solid start for the year. Let's start with Texas. Last year, ERCOT projected peak load growth to increase to 150 gigawatts by 02/1930. To meet this demand, ERCOT is proposing a regional transmission plan that would overlay new high voltage backbone across the state's transmission grid.

Both the three forty five kV and the seven sixty five kV investments are under consideration. Together with the Permian plan, ERCOT estimates these investments will total between 32,000,000,000 and $35,000,000,000 That includes approximately $14,000,000,000 to $15,000,000,000 for the Permian plan, with the import transmission pass being constructed at the 765kV level and $18,000,000,000 to $20,000,000,000 for the remaining transmission build out. I would refer you to slide nine in the appendix for a graphic that provides additional details on this. As a major owner of existing endpoints across Texas, we believe Oncor is well positioned to construct a significant portion of the required transmission infrastructure that's been identified by ERCOT. Encore is still assessing the impact of these developments and expects to have a better sense of the projected investment opportunity once the associated CCNs are filed.

Encore has begun seeking approvals for the remainder of the Permian plan and expects to continue making the required CCN filings, including for the import pass, through 2026. We're also currently monitoring the legislative session in Texas, including potential legislation that, if passed, might have beneficial impacts on the regulatory framework supporting T and D investments in Texas. In the meantime, Oncor is continuing to prepare to file its comprehensive base rate review and currently anticipates filing in the second quarter. Moving to Semper California, I'd like to start by discussing an update on the regulatory front. Every three years, California utilities submit a new cost of capital application to the CPUC, which sets authorized rates of return for their investments in critical infrastructure.

In March, SDG and E and SoCalGas, along with other large California IOUs, filed their respective cost of capital applications. The current cost of capital filings are for the years 2026 through 2028 and seek to update SDG and E and SoCalGas' respective rates of return to align with current market conditions. STGD requested a 54% common equity layer and 11.25% return on equity. At SoCalGas, the company requested a 52% common equity layer and an 11% return on equity. Please see slide 11 in the appendix for a breakout of additional details.

We expect a decision from the CPUC by the end of the year with the newly authorized rates of return effective at the start of 2026. As a reminder, this would be subject to the cost of capital adjustment mechanism, otherwise known as the CCM, which would apply in the years '27 and 2028. As it relates to the FERC T06 filing, STGD's current authorized rate is 10.1%, and you'll recall that which excludes the 50 basis point CAISO adder currently in the appeals process. New interim rates are scheduled to be implemented June 1, subject to refund. The settlement process is ongoing and expected to be resolved in the second half of this year.

Also in the first quarter, the CPUC approved an expansion of West Side Canal battery storage, adding 100 megawatts of energy storage capacity to the existing 131 megawatt facility. This expansion should be fully operational this summer and represents a significant investment in the region's energy infrastructure, supporting local communities by providing more reliable and clean power and positioning the region as a leader in sustainable energy solutions. Moving to affordability initiatives. Jeff discussed our Fit for 2025 campaign earlier, but I also want to mention that STGD and SoCalGas customers received a one time California climate credit lowering bills last month by as much as $136 at SDG and E and $87 at SoCalGas. Also, there will be a second credit applied to the bills of SDG and E customers in October, bringing the total expected bill credit up to $217 in 2025.

Also in March, an amended memorandum and ruling was issued establishing the scope and schedule for track three of the 2024 GRC. Testimony was filed to review the reasonableness of SoCalGas' pipeline safety enhancement costs for 2015 to 2020, SDG and E's pipeline safety enhancement costs from 2014 to 2019, and STG and E's wildfire mitigation costs in 2023, a proposed decision as anticipated in the first half of twenty twenty six. On the tariff front, we are closely monitoring potential impacts at Semper California. We've been proactive in taking action to manage rising prices to reduce impacts to our ratepayers. Since the pandemic, we analyzed where more supply chain risk exists and added additional sources of supply.

We expect those diversified sources to help us better manage and mitigate tariff risks. We've also engaged with suppliers in an effort to source more domestically produced equipment and materials where possible, stocking inventory of critical materials and exploring new sources of supply that help reduce tariff exposure. These activities form a part of our larger program of improving the affordability of our utility services. Moving to Sempra infrastructure. In March, we announced our plan to sell certain non core energy infrastructure assets in Mexico, as well as a minority interest in Sempra Infrastructure Partners.

Jeff discussed both earlier, but I would like to add that initial interest around these assets has been robust. On the minority interest sale process at Sempra Infrastructure Partners, you'll recall that KKR and Audia have certain rights of first offer followed by Sempra's right to respond. Also, as is customary, if we are unable to reach an agreement with our current partners, we're prepared to pursue a third party bid in an open and competitive process to help increase the value for Sempra shareholders. As outlined, we believe it will take a reasonable amount of time for both transactions to unfold and expect to provide our next update on the second quarter call in August. Moving to operational updates, Cameron LNG Phase one loaded 55 cargoes and achieved a 98% plant reliability in Q1 twenty twenty five.

Together with our partners, we're very pleased with the high quality operations from this critical infrastructure asset. And as it relates to tariff impacts, we're actively monitoring the evolving situation and assessing its potential impact on our businesses. Our current understanding is that energy, as defined as a cross border electric and natural gas deliveries, is a USMCA compliant good and is therefore unaffected by tariffs. As a result, we do not currently anticipate significant impacts from cross border energy transactions. We also continue to advance major construction projects at Cimarron Wind, ECA LNG Phase one, and Port Arthur LNG Phase one.

Cimarron Wind is progressing key construction activities, including turbine installations, and continues to target power generation in late twenty twenty five with COD planned for the first half of twenty twenty six. At ECHA LNG Phase one, we have over 5,200 workers on-site and construction is currently focused on pipe testing, electrical activities, instrumentation, and insulation, with the project around 92% complete. Additionally, we're excited to share that ECA LNG phase one has achieved mechanical completion of various subsystems, which allows for the start of pre commissioning activities. These developments are consistent with the expectation of commercial operations in spring of twenty twenty six. Moreover, would note that ECA LNG Phase one, our EPC contractor has completed its engineering and procurement activities, so we're not anticipating any significant impacts from increases in material costs.

Moving to Port Arthur LNG Phase 1, I'd like to take a moment to acknowledge the safety incident that occurred last week at the Port Arthur facility, which has resulted in the loss of three Bechtel employees. Our deepest condolences go out to the families and colleagues affected by this incident. Port Arthur construction has progressed, including the foundations, steel and pipe installations, dredging activities, major equipment setting, and other key milestones. Also on the tariff front, Port Arthur LNG began admitting all items in the designated foreign trade zones into The United States as a preemptive action back in February to avoid higher costs being levied on these items. Earlier this year, we announced that we expected to take FID on Port Arthur LNG Phase II by the end of twenty twenty five.

That remains our target as we're continuing to field strong commercial interest in the project. With that said, uncertainty in the macroeconomic environment may affect the timing of project development. As we have done in the past, we'll continue to exercise patience as we seek to mitigate cost risk and lock in favorable long term economics. To wrap up, energy infrastructure remains a crucial component to economic growth and development, and allies in Europe and Asia are looking to American leadership to improve their energy security. That's why we continue to believe Sempra Infrastructure is well positioned to create value for its owners as we look to complete a series of important construction projects and capture new opportunities by extending the scale and reach of our platform.

Now please turn to the next slide, where I'll walk through an update on our financial performance. Earlier today, Sempra reported first quarter twenty twenty five GAAP earnings of $9.00 $6,000,000 or $1.39 per share. This compares to first quarter twenty twenty four GAAP earnings of $8.00 $1,000,000 or $1.26 per share. On an adjusted basis, first quarter twenty twenty five earnings were $942,000,000 or $1.44 per share. This compares to our first quarter twenty twenty four earnings of $854,000,000 or $1.34 per share.

We're pleased with these financial results and believe they represent a solid start to the year. Please turn to the next slide. Variances in the first quarter twenty twenty five adjusted earnings as compared to the same period last year can be summarized as follows. At Sempra California, we had 88,000,000 from higher CPUC based operating margin, net of operating expenses, and lower authorized cost of capital. Sempra California also had $54,000,000 of higher income tax benefits, partially offset by higher net interest expense and other.

As a reminder, in the first three quarters of twenty twenty four, Sempra California recorded revenues and taxes in accordance with 2023 CPUC authorized levels. Turning to Sempra Texas, we had $37,000,000 of lower equity earnings primarily from higher interest and operating expenses, partially offset by higher revenues from invested capital and higher consumption attributable to weather and customer growth. At Sempra Infrastructure, we largely reported in line to the prior period, with $2,000,000 of decrease driven by lower asset optimization, partially offset by lower O and M and higher interest income. And at the parent, dollars 15,000,000 decrease is primarily due to higher net interest expense, partially offset by other expenses. Please turn to the next slide.

To conclude our prepared remarks, we're off to a solid start for the year. We understand the importance of our plan of execution for 2025, and across our management team, we're focused on delivering the strategic initiatives that Jeff outlined on today's call. Taken together, these initiatives are designed to divest non core assets in support of recycling proceeds into new investments in our Texas and California utilities, strengthen the company's balance sheet while efficiently funding growth and improving the quality and affordability of our services and reward Sempra's owners with improved visibility to consistent growth in earnings and cash flows and long term value creation. Our first quarter results represent an important first step in our growth plans. With that, we'll now take a moment to open the line and answer your questions.

Thank you. This concludes the prepared remarks. We will now open the line to take your questions. And our first question will come from Ross Fowler from Bank of America. Your line is open.

Good morning. How are you? Good morning, Kevin. Good morning, Kevin.

So just a couple of questions to touch on, and maybe I'm just tired because I'm 42 earnings releases deep. But just to walk through the SiP process from here, I think KKR would be due on May 12 and then we've got, if I've got it right, 10 for Adia and then you would have thirty days to respond to either one of those, which would kind of put us late June, early July. And that's the contextualization for why you're talking about an update on the second quarter call. Am I thinking about that correctly?

Yeah, the only thing I would clarify is to think about that sequentially. So once KKR provides their written offer, if they were to bid, then Sempra has a thirty day process to deliberate that and or respond. After that process, then Adi would have their ten days followed by Sempra's thirty days to respond to that. So I think we feel comfortable that Q2 call will be the appropriate time to update it. And look, we certainly realize that people like more details.

I think for us, the best thing to do is just let the process play itself out. I think Q2 will be the appropriate time for an update.

Perfect, Jeff. Thank you. And then Alan, maybe one for you just as we sort of contextualize what you've referred to I think in our conversations in the past is the Texas miracle. In the Texas growth, we've seen the seven sixty five kV network as I look at slide nine into the Permian then there's this other seven sixty five stuff off to the east. Would be the advantages or disadvantages of doing the rest of that seven sixty five or March?

And then just contextualize what you're seeing on the growth front in Texas right now.

You bet. Thanks, Ross. Yeah, the Texas miracle, as I've said before, continues. Just from a general high level perspective, things I generally talk about when I'm talking about growth, premise growth up again 3% over quarter one last year, 19,000 new premise. Transmission POIs, new requests up 66% year to date first quarter versus last year first quarter.

Total active requests up 35%. Our LC and I large customer queue continues to grow at a record pace, now up 30% of where we were last quarter of the 152, I think, what we announced last time. West Texas, Far West Texas weather zone, up 3% new peak Culberson transmission lube up 41% over last year's peak and Stanton transmission lube up about 9%, eight point eight % over last year's peak. So those are kind of the metrics I generally talk about on these calls. Around growth, obviously, we've got a lot of other things going on that you mentioned.

There's the Permian plant, obviously, with the latest announcement that we're going to be doing the import pass with seven sixty five kV. That's a big one. And then the remainder of the STEP program, the seven sixty five plan that ERCOT and the PUC are looking at. There's we've said before, we were agnostic from a financial perspective on July versus March because if you don't build the July, you have to build a lot more March. So we're going to be good either way.

However, from an operational perspective, we've been very adamant that operationally July makes a lot more sense for a state that's growing like ours. Obviously, you build bigger capacity now on less right of ways, you have increased ability to operate your system differently and more effectively. It provides for the allowance of generation siding at pretty much anywhere you can connect to the seven sixty five as opposed to having to build three forty five directly to locations where generation is coming online. So we think there are operational benefits to seven sixty five. That's what we said at the legislature, that's what we said at the PUC, and we were pleased with that announcement.

Now we'll have to see what happens with kind of the eastern half of the seven sixty five plan. Again, there's a decision to be made there as to how and when that will take place if the PUC and the legislature goes forward. But obviously, as we've said before, and I think as Jeff alluded to, we have opportunities on both those plans given the number of endpoints that we own, which is around, I think, over 1,300 now, and the application of the 1938 bill, which formalized the ERCOT criteria of using endpoints to determine the ownership of transmission lines. So we feel very good about the growth in Texas. We feel very good about where ERCOT and the PUC are headed with these two major transmission plans, and we think we'll be a major participant in both.

Well, the only thing I would add is it's obviously a very ambitious plan. We think it's critical to support the state's future growth, and I think given the endpoints that Alan just identified, we certainly expect to be in a position to build over half of the proposed investment.

Thanks for that Jeff and Alan as well. Just one last one for me, Jeff, highlighted in your opening comments the Fit for 2025 program. Can you maybe talk about something in that program a little bit more specific like what you've achieved so far and what you might have sight line to just to give a little bit of flavor of what you're seeing there and what those programs actually entail?

Yeah, sure. Last year, Ross, we kicked off our Fit for '20 '20 '5 campaign to improve the competitive cost structure of our company. This isn't something that's new, it's simpler for those of you who have followed our company for a long period of time. We routinely go back and look for ways to reduce costs and improve productivity. What we're fundamentally trying to do, Ross, is find new and better ways to serve customers.

We're looking at opportunities to reduce headcount through voluntary retirement programs. We're making new investments in technology. SDG and E has targeted using artificial intelligence, for example, in over 40% of its customer interactions in its call center. We'll continue to look at ways to basically outsource calls where we think it can be done on a cheaper basis. But look, I think part of serving customers better is working hard to improve the affordability of their services.

you a quick recap of where we think we're at. In Texas today, Encore, for example, has the lowest rates among investor owned utilities, and notwithstanding their current $36,000,000,000 capital plan, Ross, they expect to remain the lowest across the five year plan. Similarly, at SoCalGas, you recall that's the largest natural gas utility platform in The United States. Their bills today are in the bottom quartile nationally. And similarly, at SDG and E, Ross, we have the lowest average bills amongst investor owned utilities in the state.

So as you think about our five value creation initiatives, part of creating a more competitive cost structure is about finding better ways to be responsive to the needs of our customers. And maybe before I wrap up, Caroline, you could add a few specifics that you're taking at SDG and E to give a little more color to Ross.

Sure. Happy to do so. We remain laser focused on affordability for customers, and we're proud that SDG and E's monthly electric delivery bills are lower for the second year in a row. But we have more work to do there. Through our Fit for 25 initiative, we're driving down operating costs and improving efficiencies.

We're securing non ratepayer sources of funding like tax credits for batteries and advocating for policy changes. We applaud the governor of California issuing the executive order last year, which focuses on improving electric affordability that's highly constructive. And the order is largely focused on pass through programs that become less cost effective and does not appear to impact equity or capital deployment. SDG and E recently filed to reduce costs associated with certain energy efficiency programs that are no longer cost effective, and if approved, it could save customers $300,000,000 And we're really happy about the use of climate credits that Karen mentioned to lower energy bills by $217 this year. Customer affordability is a top priority, we're doing everything possible to make sure that our bills are transparent, they're stable, and they're affordable.

Thank you. Our next question will come from Carly Davenport from Goldman Sachs. Your line is open.

Hey Jeff, thanks so much for taking the questions. Maybe to start on the LNG front, just to follow-up on some of the comments in the prepared remarks. You talked about some of the macro uncertainty potentially impacting project development on Port Arthur 2. Could you just help us frame that potential impact? That more just a potential kind of slippage or is that anything we should think about from a structural shift in views on that project?

No, I would just clarify, Carly. I think we're in great shape on Port Arthur Phase II. And Justin, maybe you could walk through how you're thinking about that project moving forward this year.

Yeah. Thanks, Jeff. Hi, As Karen said in prepared remarks, we are continuing to target FID in 2025. We're very pleased with the strong commercial interest in that project and the progress we're making on the development front. Those include commercial negotiations, receiving our final permits and financing the projects.

Karen mentioned some of the recent macroeconomic uncertainties. And I think for us, it's important to emphasize we're committed to managing cost risks and maintaining discipline to achieve our targeted returns. And that, Carly, will take precedent over the timing of any announcements. I also just want to remind folks of the point Karen and Jeff have made, that priorities reflected in Sempra's capital program are focused on growing regulated utilities, and that means we'll only take FID on a project like Port Arthur Phase two when we're comfortable it will deliver strong shareholder value.

Great. Thanks so much for that. That really helpful. And then maybe just a clarification on some of the comments in the prepared around the tariff exposure. I recognize there's still a degree of kind of movement there, but could you just help us frame out the potential earnings exposure on a Sempra consolidated basis as well as just as you think about the broader capital plan over the next five years, how you think about the exposure there?

Yes, I would say right from the top, I think this remains a fluid environment for all industries, but I think we're in good shape here and any type of impact from tariffs, I think falls well within our established guidance. Let me go through a couple of things that might be helpful. At our utilities, Carly, we remain focused on minimizing tariff exposure for our customers. The majority of our equipment is sourced domestically and that limits the direct impact on planned capital expenditures to around 2% or 3%. To reduce that impact even further, our utilities are taking steps to diversify supplier pool and are exploring new supply sources with reduced exposure.

Second, they're adding higher levels of domestically produced equipment and materials. And finally, they're continuing to stock higher levels of inventory for critical materials, Karen talked about that in her prepared remarks. Turning to Semper Infrastructure, I think it's also a very positive story there. At ECA, LNG procurement is complete and not impacted by tariffs. At Port Arthur LNG, approximately 90% of our spend is with U.

S. Suppliers and contractors. Karen noted this, but we're also currently using foreign trade zones to mitigate tariff impacts and Train one steel was fully sourced domestically. And I would just mention that the remaining tariff exposure for Phase one is estimated to be about 1% of CapEx. On our other development projects, we would only take FID after securing firm pricing and also mitigating any cost risk to achieve our target returns, and we'll be very disciplined about that.

So as we've looked at this back in March and April and May, we feel like we're in very good shape relative to tariffs.

Great. Appreciate all that detail. Thanks so much for the time.

Thank you. Our next question comes from Steve Fleishman from Wolfe. Your line is open.

Hi, Jeff, Karen, Allen. So I wanted to maybe focus for a minute on Texas and just the pending Unified Tracker Bill. And maybe you could talk a little bit about how that would interact, if at all, with your rate case filing and what the benefits of the bill would be relative to status quo?

Sure. Let me provide a couple of broader comments, and then we'll come back and talk about the legislative session and specifically UTM. I would think about the rate case separately. Mean, the way to think about it is they've got an authorized ROE today, Steve, of 9.7%, And there's two things that can impact lower earned ROEs. One is when you've got a higher cost structure that can be resolved in the base rate review.

And secondly, just ordinary regulatory lag based on how their capital tracker mechanisms work. So I think what Alan and team will try to focus on is continuing to strengthen their balance sheet by addressing both sides of that, but I'll make a quick comment and I'll pass it over to Alan, which is I talked about early on our value creation initiatives, and the first one, Steve, is this idea of investing about $13,000,000,000 this year. The second component of that is we're committed to actually improving our financial returns, and that means whether it's legislative sessions in Texas or California or base rate reviews or regulatory filings, we're very, very focused on improving our regulatory compact. That's kind of the framing as you think about what we might be able to accomplish in Texas legislative session as well as the base rate review. But Alan, if you could maybe provide some additional color on the legislative session,

Yeah. Thanks for the question, Steve. There's a number of bills that continue to make progress through the legislature, and we're obviously tracking everything from UTM to interim rates to wildfire and capital structures. And there's still a lot of time left, even though it's only a month, and there's still a lot of time for material changes to be made to all these bills. But we'll continue monitoring closely, working with all the constituents, we'll have a better update on what actually gets through on the Q2 call, specifically with regards to House Bill five thousand two and forty seven or the UTM bill.

It's the most impactful potential bill for us given our large and growing capital plan. It'd give us a way to moderate the impacts of regulatory lag and improve our credit quality. We've had broad support from stakeholders and we really are appreciative of those parties who have worked with us on this bill. And while there are other bills that are out there that we'll continue to monitor work on, this one is potentially the most important to us. Generally, what it would do is it would provide a one stop kind of streamlined mechanism in lieu of the existing trackers, your TCOS, ECOS, and TCRF trackers that are just that we make our adjustments with today.

So there's benefits to it. We still need approval by the Senate, and it still needs to be assigned by the governor. But we'll keep working on it, and hopefully it also would decrease the workload of the PUC staff. So there's benefits to this bill. The rate case, as Jeff said, we're still planning on filing something in the second quarter.

So I would think of those two separately right now for the reasons that Jeff described, and that's kind of where we are in UTM and the rate case.

Yes. What if you don't mind on the same kind of thematic, Jeff, one other question. California, and I think on the last call, were pretty optimistic on something maybe this year on the wildfire fund changes. Could you maybe give us your latest thoughts on any potential changes on AB ten fifty four?

Yes. And I think this is a good follow on question because very similar to Texas, they've got a House Bill 145 in Texas, Steve, which we also think is important, which really attempts to move the standard there from a simple negligent standard to a gross negligent standard. So as you think about opportunities, whether through legislation or regulation, anything we can do to take risk out of the operating environment we're sure if our balance sheet is obviously very, very positive for the growth story that we have underway in Texas. To your point in California, it's very similar. Obviously, Wall Street is following the developments up and down the state relative to wildfire risk.

I remain quite constructive that here in California, the leadership is focused on the right things, and let me highlight a couple of points that you might find helpful. First off, I've long said that wildfire in the state of California is a societal issue. People tend to think of it narrowly as a utility issue, but it's much more important to the state, from a statewide standpoint in terms of how folks go about their day to day lives here, and I would applaud the governor's work. He has his team, Steve, focused on three key areas. The first of which is the size and durability of the wildfire fund under AB ten fifty four.

Second is opportunities to continue to improve the insurance environment, particularly for residential homeowners. And finally, there's a continued interest in looking for opportunities for regulatory reform. I would mention when we talk about wildfire, I think it's always important to differentiate SDG and A, Steve. We think that they have demonstratively lower wildfire risk for three reasons. Obviously, it's a significantly smaller service territory.

Second, it's a semiarid desert topography, so there's not that much fuel content relative to other parts of the state. And obviously, since 02/2007, there have been significant amounts of funding in the neighborhood of 6,000,000,000 to $7,000,000,000 around our leadership position in wildfire science and mitigation. But if I could, Steve, I've got Caroline Winn here as the CEO of SDG and E. And Caroline, perhaps you could also share your perspective from your company.

Sure. Hi, Steve. Yes, we're proud of the significant strides that we've made in mitigating wildfire risk and our strong track record which includes seventeen years without a utility related catastrophic wildfire. Much of our recent work was facilitated in part by the passage of AB ten fifty four and the stability that the wildfire fund has provided to the market. So it seems clear to us that we need to build on the successful foundation of AB ten fifty four to extend its framework and durability, as Jeff said.

The conversations that we've had up and down the state leave us confident that stakeholders understand the criticality of addressing the issue and the important role that investor owned utilities play in supporting California's growth, economic development, and the safety of the communities we serve. So yeah, absolutely agree with Jeff. I feel constructive about getting something done this year.

Thank you. Our next question comes from Nicholas Campanella from Barclays. Your line is open.

Hey. Hey, how's everything going? How's everyone doing? Thanks for taking

Hey, just really quick on the EPS CAGR commentary. You kind of talked about in the prepared remarks as not being linear. Understand that Encore is working through a rate case. You're working through these asset sales, but I guess just what year do you think that you'd be above that 7% to 9% range?

Look, I think we haven't given that level of guidance. I think one of the things we realized that we got a lot of feedback from our Q4 call was there's probably an opportunity to be more clear and less ambiguous about our expectations, and obviously it was a very challenging call for us. It's something that we take very seriously, and I think what we wanted to do is make sure we were very clear eyed about what the opportunity was through 2029, so we took the opportunity to clarify for everyone that we expect to be at the high end or above that range. I think some of the things, Nick, on today's call provides a little bit more visibility into our confidence there. You recall that we had a $36,000,000,000 capital plan that we discussed in February for Encore, and now that you see the July decision, now that you've seen not just the local paths, but the import paths at the Permian being moved back to 02/1930, obviously we feel quite confident that a lot of that $12,000,000,000 will come into the plan, and that's currently not in our forecast of 7% to 9%.

That is. Thanks so much, Jeff. And then, you know, just a follow-up on SIP and the transaction you're pursuing here, is there any scenario in which you think you can kind of go beyond the 30%? And then, you mentioned it's accretive, which is great. So clearly, the multiple should still be robust.

But maybe you can kind of talk about your confidence level and just the current outlook of interest rates and tariffs and economic uncertainty potentially impacting this valuation versus where you've successfully transacted on it in the past?

Yeah, I would start, Nick, by some conversations you and I have had before, but I think over long periods of time, Sempra has an established track record, both in acquiring assets and also in divesting assets. This is something we've been very thoughtful about with our board of directors. We tend to look at these types of opportunities to unlock value almost at every board meeting, so we're always open to new ideas. I think what we've tried to do is be very thoughtful about picking a scope of transaction, a transaction boundary between 1530% that meets the needs of our capital program. But really, a comment that's true of our entire portfolio is we're always open to new ideas.

So I think we've got this thing sized correctly, but if we happen to take both a conforming bid and a non conforming bid, we would always look at that through the lens of what creates the most value for our owners.

All right. Thanks for taking my questions. Appreciate it.

Thank you. Our next question will come from Shar Pourreza from Guggenheim Partners. Your line is open.

Sempra Q1 2025 Earnings Call Transcript | Fortune

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Sempra (SRE) Q1 2025 Earnings Call Transcript

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